5 Best ETFs for April 2024 - NerdWallet (2024)

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Diversification is hard work. A well-rounded investor may own stock in dozens or even hundreds of publicly-traded companies — and stock research on all of those companies can take a lot of time.

One workaround is to invest in exchange-traded funds (ETFs). These are baskets of companies that trade on exchanges like the New York Stock Exchange and the Nasdaq, just like stocks, and can provide exposure to many stocks with a single purchase.

Best ETFs as of April 2024

Below is a list of the best ETFs with expense ratios below 0.5% that hold large U.S.-based companies, ordered by five-year performance. Leveraged ETFs, inverse ETFs and hedged ETFs are excluded.

Ticker

Fund name

5-year return

SMH

VanEck Semiconductor ETF

35.02%

SOXX

iShares Semiconductor ETF

30.70%

XLK

Technology Select Sector SPDR Fund

24.57%

IYW

iShares U.S. Technology ETF

24.09%

FTEC

Fidelity MSCI Information Technology Index ETF

22.79%

Source: VettaFi. Data is current as of March 29, 2024, and is for informational purposes only.

ETF advantages and disadvantages

ETF pros

Investors have flocked to exchange traded funds because of their simplicity, relative cheapness and access to a diversified product. Here are the pros:

Diversification

While it’s easy to think of diversification in the sense of the broad market verticals — stocks, bonds or a particular commodity, for example — ETFs also let investors diversify across horizontals, like industries. It would take a lot of money and effort to buy all the components of a particular basket, but with the click of a button, an ETF delivers those benefits to your portfolio. Diversification can help safeguard your portfolio against market volatility. If you invested in just one industry, and that industry had a really bad year, it's likely your portfolio would have performed poorly too. By investing across different industries, company sizes, geographies and more, you give your portfolio more balance. Because ETFs are already well-diversified, you don't have to worry about creating diversification within your portfolio.

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Transparency

Anyone with internet access can search the price activity for a particular ETF on an exchange. In addition, a fund’s holdings are disclosed each day to the public, whereas that happens monthly or quarterly with mutual funds. This transparency allows you to keep a close eye on what you're invested in. Say you really don't want to be invested in oil — you'd be able to spot those additions to your ETF more easily than with a mutual fund.

Tax benefits

ETFs have two major tax advantages over mutual funds.

If you invest in a mutual fund, you may have to pay capital gains taxes (or, the profits from the sale of an asset, like a stock) through the lifetime of your investment. This is because mutual funds, particularly those that are actively managed, often trade assets more frequently than ETFs. Most ETFs, on the other hand, only incur capital gains taxes when you go to sell the investment. This means you'll pay less tax on your ETF investment overall.

As mutual fund managers are actively buying and selling investments, and incurring capital gains taxes along the way, the investor may be exposed to both long-term and short-term capital gains tax. If you're invested in an ETF, you get to decide when to sell, making it easier to avoid those higher short-term capital gains tax rates.

» Related: Best-performing high-dividend ETFs

ETF cons

Exchange traded funds may work well for some investors, but they aren't perfect. Here are the cons:

Trading costs

ETF costs may not end with the expense ratio. Because ETFs are exchange-traded, they may be subject to commission fees from online brokers. Many brokers have decided to drop their ETF commissions to zero, but not all have.

Potential liquidity issues

As with any security, you’ll be at the whim of the current market prices when it comes time to sell, but ETFs that aren’t traded as frequently can be harder to unload.

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5 Best ETFs for April 2024 - NerdWallet (4)

Risk the ETF will close

The primary reason this happens is that a fund hasn’t brought in enough assets to cover administrative costs. The biggest inconvenience of a shuttered ETF is that investors must sell sooner than they may have intended — and possibly at a loss. There’s also the annoyance of having to reinvest that money and the potential for an unexpected tax burden.

More reading about ETFs

  • How to invest in ETFs.

  • Best-performing semiconductor ETFs.

  • Bitcoin ETFs.

Frequently asked questions

Are these the best ETFs for me?

The best ETFs for your portfolio will depend on your circ*mstances and goals. It's a good idea to talk to a financial advisor if you're not sure what type of ETF is right for you.

What should I look for when choosing an ETF?

It's good to check an ETF's historical returns, expense ratio and holdings before buying it.

Neither the author nor editor held positions in the aforementioned investments at the time of publication.

5 Best ETFs for April 2024 - NerdWallet (2024)

FAQs

5 Best ETFs for April 2024 - NerdWallet? ›

One metric that investors often look to is trailing one-month performance. The top ETFs for equities, bonds, fixed income, commodities, and currencies for April 2024 based on this metric include CRPT, FCVT, EMHY, DBA, and UUP.

What are the best ETFs for April 2024? ›

One metric that investors often look to is trailing one-month performance. The top ETFs for equities, bonds, fixed income, commodities, and currencies for April 2024 based on this metric include CRPT, FCVT, EMHY, DBA, and UUP.

What is the best ETF for beginners in 2024? ›

An ETF focused on the broader market is best for beginners. Top options include the S&P 500-focused Vanguard 500 ETF or the even broader Vanguard Total Stock Market ETF. They both own hundreds of stocks and have low expense ratios.

Are tips a good investment in 2024? ›

TIPS may be a sound investment to protect against inflation, but they're not wealth-building tools like stocks. March 22, 2024, at 3:47 p.m. If you're worried about inflation, TIPS can be a good choice – just don't count on them for big gains.

What ETF beat the S&P 500 over 10 years? ›

The Vanguard Growth ETF has outperformed the S&P 500 over most time periods, including a 10-year annualized return of 14.7% vs. 12.5% for the S&P 500.

How many different ETFs should I own? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

Is a recession a good time to buy ETFs? ›

Key Takeaways. Investors looking to weather a recession can use exchange-traded funds (ETFs) as one way to reduce risk through diversification. ETFs that specialize in consumer staples and non-cyclicals outperformed the broader market during the Great Recession and are likely to persevere in future downturns.

Is there a best time of day to buy ETFs? ›

Generally speaking, the best time to trade ETFs is closer to the middle of the trading day rather than the beginning or end.

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